COVID-19 Tax Updates

COVID-19 Support, Tax relief and other ways we can help

Category: COVID-19 Tax Updates

On 18 March 2020 the Cook Island Government announced a $61 million COVID-19 Economic Response Package. The purpose of the COVID-19 Economic Response Package was to support our people in response to, and to mitigate, the effects of COVID-19.

The COVID-19 Economic Response Package consists of the following support:

School Closure Support Payment

Electricity subsidy

Electricity subsidy of 100 per cent for households on Rarotonga and Aitutaki for three months starting from the 19 March 2020 meter reading. No application is required to access the subsidy. Your bill will be adjusted by the two electricity companies. Refer to TAU Short Term Relief Package for details.

One-off welfare payment

One-off welfare payment of $400 to old age pensioners, care givers and the infirm and destitute who are registered with the Ministry of Internal Affairs. If you have queries contact the Ministry of Internal Affairs on 29370 or visit their website.

Reduced CINSF contributions

Reduction in individual employee Cook Island Superannuation Fund (CINSF) contributions from 5 to 3 per cent for a 3-month period. You do not need to do anything to apply. Your employer will make the necessary changes to your pay.

Unemployment benefit

One month benefit at the minimum wage to be provided to all individuals who have become unemployed due to the impact of COVID-19. If you have queries contact the Ministry of Internal Affairs on 29370 or visit their website.

Employment services

The Ministry of Internal Affairs will assist to find you employment as soon as possible through offering employment services. If you have queries contact the Ministry of Internal Affairs on 29370 or visit their website.

Wage Subsidy

The wage subsidy measure is designed to ensure that employers keep their staff on the payroll and to keep business going as best as possible under the current circumstances.

About the wage subsidy

An employee wage subsidy based on the minimum wage will be made available to eligible businesses over a 3-month period:

 $266 per week for a full-time employee working 20 hours per week or more;

 $133 per week for a part-time employee working between 5 and 19 hours per week.

The subsidy payments will be made monthly, with three payments covering a 3-month period, commencing on 30 March 2020, and ending on 30 June 2020. Total payments will be based on the number of staff employed by your business, and their hours worked, at the time of each payment. Should you terminate an employee, or an employee leaves your employ, you will be required to declare this. If you continue to claim funds for employees that are no longer in your employ, you will be required to repay any overpayment.

Who can access the wage subsidy?

If you're a registered business and you have experienced a revenue decline as a result of the pandemic, you may qualify to get the COVID-19 wage subsidy. Payments will be effective from the time that businesses can show that they have experienced a 30 per cent drop in revenue, with payments backdated to the beginning of the following month.

For example, a business that can show a reduction in revenue of 30 per cent in March 2020, will be eligible for the subsidy from 30th March 2020. A business that does not show a decrease in revenue until the month of April 2020 will be eligible for the subsidy from 30th April 2020. In either case, the business will continue to receive the wage subsidy until 30th June 2020.

Who is eligible?

To qualify for this measure:

 Your business must be registered with the Revenue Management Division (Revenue Management) of the Ministry of Finance and Economic Management and CINSF and operating in the Cook Islands. If you are not currently registered you must register by 30 April 2020 and provide evidence that you were operating prior to 1 March 2020.

 Your employees must be legally working and currently living in the Cook Islands. Consideration may be given at a later stage, and on an individual basis for those migrant workers who are currently overseas and affected by the travel restrictions.

 Your business must have experienced a minimum 30 per cent decline in revenue over the period of a month when compared with the same month last year, and that decline should be related to COVID-19. To verify this, you must lodge your VAT tax return for the period ended 31 March 2020.

 If you are not VAT registered or have been in business for less than 3 months you will need to provide documentation (e.g. bank statements, market registration) to enable your loss of income to be assessed.

 Businesses must complete a declaration form to allow assessment of business tax information held by Revenue Management for this purpose.

 Employer to submit a declaration of wage subsidy through their CINSF account before the next payment is released. If additional employees have been taken on during the month, these should be added.

Employers are required to continue to pay their staff, at or above the minimum wage. If your employees are earning more than the minimum wage, you can continue to pay them at their normal wage rate, this payment is not required in addition, but is to ensure that you have the funds available to pay your workers.

You will be required to declare the number of employees still requiring the wage subsidy to allow for adjustments in future payments. If you have added new staff, your wage subsidy will increase accordingly and if you have reduced your staff, it will decrease. If you have workers that have been redeployed to other employers, you are not required to submit a request for the wage subsidy on their behalf, they will be paid via their new employer.

All applications for the wage subsidy will be assessed by Revenue Management. If you have queries please contact them by email at tax.info@cookislands.gov.ck and enter “wage subsidy” in the subject line. If you are unable to send an email, Revenue Management can be contacted on +682 29365.

Training subsidy to upskill workers

The purpose of this measure is to encourage businesses to take advantage of what may be a slow time to upskill their workers and improve their productivity so that businesses are better able to respond when the crisis is over, and the economy begins to recover. More information can be found on the Ministry of Internal Affairs website.

This measure is being administered by the Cook Island National Superannuation Fund. If you have queries contact them on 25515 or visit their website.

Cash Grants

The one-off cash grant provides an immediate cash injection to all registered businesses that are affected by COVID-19. It will assist to keep them operating during the crisis and improve their chances of getting back on their feet afterwards.

$10,000 for those businesses with a turnover between $300,000 and $5 million

$15,000 for those registered businesses with a turnover greater than $5 million

The payment will be made as a one-off payment to each business that qualifies. The cash grant scheme is administered by the Revenue Management Division. Payments to eligible businesses will be made as soon as processed, after 1 April 2020.

Who is eligible

Your business must have been operating in the Cook Islands prior to 1March2020.

Your business must be registered with Revenue Management and CINSF.

If you are not currently registered you must register by 30 April 2020 and provide confirmation of business operations prior to 1 March 2020.

Your business activity must have experienced a minimum 30% decline in revenue over the period of a month when compared with the same month last year, and that decline is related to COVID19.

To verify this you must lodge your VAT tax return for the period ended 31 March 2020.

If you are not VAT registered or have been in business for less than 3 months you will need to provide documentation (e.g. bank statements, market registration) to enable your loss of income to be assessed.

Businesses must complete a declaration form to allow assessment of business/tax information for this purpose.

Reductions in the mandatory employer Cook Island National Superannuation Fund contributions will temporarily provide additional financial support for businesses during the COVID-19 crisis. This is a complementary measure to the same reduction being applied for employee CINSF contributions.

Employers will be responsible for making the necessary adjustments through their Cook Island National Superannuation Fund accounts for their contribution and that of their employee(s).

Self-isolation payment

The COVID-19 self-isolation payment is aimed at supporting those businesses covering absences due to self-isolation. In prevention of a pandemic outbreak, it is important to encourage workers to respect self-isolation instructions without worrying about loss of income. If you have queries contact the Ministry of Internal Affairs on 29370 or visit their website.

Electricity subsidy

The subsidy, which applies to all business electricity customers, will commence from the meter reading following 19 March 2020. Monthly electricity bills will be 60 per cent subsidised for business customers in Rarotonga by Te Aponga Uira and 100 per cent subsidised in Aitutaki by Te Mana Uira O Araura. No application is required to access the subsidy. Customer bills will be adjusted by the two electricity companies. Refer to TAU Short Term Relief Package for more information.

An income tax credit of up to $2,000 for short-term accommodation providers with up to 10 beds

Short-term accommodation providers are an important part of the Cook Islands tourism industry. To assist these people, an income tax credit of $2,000 is available for short-term accommodation providers with up to 10 beds.

The maximum income tax credit that any one short-term accommodation provider can receive is $2,000.

How to qualify

Your business must be registered with Revenue Management and operating in the Cook Islands.

Unregistered short-term accommodation providers must register with Revenue Management before 30 April 2020. Register now if you are not already registered.

Your short-term accommodation facilities can have up to a maximum of 10 beds.

How to apply

You will apply for this tax credit by signing a declaration confirming that you meet the qualifying criteria. This declaration will form part of your 2020 income tax return.

If you have queries email them to Revenue Management at tax.info@cookislands.gov.ck and enter “Income tax credit for small short-term accommodation providers” in the subject line. Note that telephone support on +682 29365 will be strictly limited over the next few months.

Provisional tax estimation or re-estimation

Some taxpayers provided and paid their provisional tax estimates to Revenue Management before the onset of the COVID-19 pandemic. For this reason your earnings have may have been overestimated. If your circumstances have changed due to COVID-19, you may be able to make an estimate or re-estimate of provisional tax.

Increase in the provisional tax threshold from $2,000 to $5,000

To provide additional relief the provisional tax threshold has increased. This applies to provisional tax for the 2020 and subsequent tax years.

If you have previously been assessed and your provisional tax payable for the 2020 tax year is between $2,000 and $5,000 this will automatically be reassessed by Revenue Management. If you have paid provisional tax relating to the 2020 tax year but are no longer liable for provisional tax, refunds of the amount paid can be arranged.

How to apply

If you think you might be entitled to a provisional tax refund relating to your 2020 tax year please email Revenue Management at tax.info@cookislands.gov.ck and explain your situation so we can look into it. Please insert in the subject line “Provisional tax refund”.

Queries can be emailed to Revenue Management at tax.info@cookislands.gov.ck. Note that telephone support on +682 29365 will be strictly limited over the next few months.

Extension of tax return due date

Filing extensions available only for income tax returns. VAT and PAYE returns must be filed as per normal by the due date. Although, penalties applied to any late VAT and PAYE return may be remitted upon request and approval from our office. Refer to the Standard Practice Statements below for more details.

Guidance on VAT treatment of cancelled bookings

If customer bookings are canceled which are already included as income in a VAT return, the following VAT treatment should be applied:

 If a credit or voucher is given to the customer which can be used for a future booking no VAT adjustments are needed; or

 Alternatively if their money is refunded keep a schedule of the refunds and enter the VAT amount of the total refunds in box 14 of the VAT return for the VAT period in which the refund is paid. A copy of the schedule of refunds should be included with your VAT return when it is submitted.

If you have queries please email Revenue Management at tax.info@cookislands.gov.ck and enter “VAT” in the subject line or contact us by phone 29365.